The Board of Directors (the "Board") of Auric Pacific Group Limited ("APGL") recognises the importance of APGL and the Board taking on an integrated enterprise-wide perspective of risk management practices and the need to enhance management's accountability of APGL's risk management. The principal objective of the enterprise risk management ("ERM") framework is to support the objectives and commitments of APGL and its subsidiaries (collectively, the "Group") to safeguard the interests and assets of the Group's stakeholders as the Group pursues its strategic objectives and business goals. Principle 11 of the 2012 Code of Corporate Governance issued by the Monetary Authority of Singapore on 2 May 2012 reinforces the Board's recognition.
On 12 August 2013, the Audit and Risk Committee ("ARC") was delegated the role of assisting the Board in its risk management function. A consolidated risk management review, which includes the implementation of a risk management framework, the systemic documentation and testing of business continuity plans together with the implementation of a group wide insurance programme was carried out commencing from financial year ended 2014 to 2015.
Risk Management Process
The ARC with the assistance of management, internal and external auditors, reviews and reports to the Board at least annually on the adequacy and effectiveness of the Group's internal controls, including financial, operational, compliance and information technology controls, established by Management. In addition, the Board with the assistance of the ARC reviews and oversees the design, implementation and monitoring of the risk management and internal control systems.
The Board, with the endorsement of the ARC, has in financial year ended 2014 adopted an ERM policy that documents the Group's ERM strategy, objectives and governance structure. Pursuant to the terms of the policy, the head of each business division is the risk owner and is responsible for determining and managing the overall risk exposure of his/her business division. Risk coordinators located at each business division is, and shall be, coordinating the implementation of the ERM policy, the updating and reporting of risk status, and to upkeep the risk registers of their respective business divisions. Notwithstanding, every staff has a role to play in risk management. ERM and business continuity plan awareness workshops had been conducted in financial year 2015 and planned for financial year 2016.
To facilitate the reporting and monitoring of risk, the ARC has endorsed the use of a web-based corporate risk scorecard system, a common platform which enables business divisions within the Group to report risks and risk status consistently and cohesively. In this respect, with the assistance of the risk management coordination team ("Risk Management Coordination Team") which resides at APGL, the ARC shall be provided relevant reports disclosing the risk status of the Group.
The web-based corporate risk scorecard system captures risks, mitigating measures, timelines for implementation and risk ratings. Key risk indicators are established as safeguards and to monitor risk, where applicable. Scorecards are consolidated with the assistance of the Risk Management Coordination Team and reviewed at the senior management level before they are escalated for review by the ARC.
Key Risk for Financial Year 2016
Following the assessment of key risks ("Key Risk") by senior management in financial year ended 2013 and approved by the Board with the endorsement of the ARC, risks identified under each operational level shall be, where relevant, grouped under each Key Risk, when reported to the ARC. The Key Risk faced by the Group for financial year 2016, in summary, includes the following:
- Strategic Direction Risk - Taking into consideration the territories and markets that the Group operates in, and the pressures that competition has on the Group and its revenue and margins, the Group faces risk in its (i) application of its assets and capital towards suitable investments, markets and product launches, and (ii) seizure of business and investment opportunities when such opportunities arise.
- Capital Availability and Capital Management Risk - Taking into consideration the available terms in the equity and debt markets, the Group faces the risk of failing to obtain suitable financing to support and sustain its development and growth.
- Execution Risk - Due to the complexities of the food business, the uncertainties of supply and the reliability of the supply chain, the Group faces the risk that its strategic plans are not effectively executed or meets the objectives of the Group and its strategy.
- Key Personnel and Talent Attraction and Retention Risk - The competition for talent in Singapore and the countries which the Group operates has led to the risk that the Group is not able to attract and retain key personnel and talents with the appropriate and required skill-set/experience/competence to meet the business objectives of the Group.
- Manpower Availability Risk - The manpower regulations of the respective jurisdictions in which the Group operates increases the risk of the Group obtaining and retaining manpower to meet its operational needs.
- Food Contamination Risk - Taking into consideration the nature of the Group's businesses, the risk of third party supplier and customer failing to comply with the Group's food safety/hygiene policies and procedures resulting in the contamination of food products.
- Food Quality Risk - Taking into consideration the nature of the Group's businesses, the risk of third party suppliers failing to supply products of adequate quality standards required and expected by the Group.
- Disruption in Food Production Risk - Taking into consideration the nature and age of its equipment and the availability of good external manufacturing capabilities, the risk of disruption in food production due to adverse external events and the breakdown of such equipment.
As at the date of this report, the Key Risk of the Group have been mitigated. The periodic review and progressive testing of business continuity plans, the ERM awareness training conducted for the Group and the implementation of the Group Insurance Programme serve as important steps in the mitigation of Key Risk. Among various measures and procedures implemented within the Group, with the implementation of the ERM framework, the ARC with the assistance of the Risk Coordination Management Team will be able to monitor the effectiveness of implemented risk mitigation measures, and if there are any unusual exposure to a particular risk.